It gives me a great pleasure to welcome you all to the 13th Middle East Insurance Forum. In its 13th year now, this forum has come a long way in supporting and strengthening the insurance industry. It has now firmly established its reputation as the region’s most influential annual gathering of the insurance industry leaders, supporting growth, excellence and innovation in the local and regional insurance industry. The Central Bank of Bahrain is proud to be associated with this event and will continue to support it in the future. I would like to thank the organizers, sponsors and speakers for supporting this important gathering.

The theme of this year forum is " The Current Challenges and their Implications on the Regional Insurance Industry”. This theme is important and timely as the insurance industry in the Mena region is undergoing transformation and there is a tremendous potential for the regional insurance market to grow and thrive.

As you are aware, the Middle East economies have expanded at a healthy rate over the last decade and have made a significant progress in a number of sectors such as petrochemicals, infrastructures and telecommunications. The insurance industry in the region has also experienced steady growth on the back of this economic development, improved regulatory environment, and increased public awareness.

Generally, the global economic situation is mostly favorable for insurance growth. The US real GDP is growing slightly faster than 2%, the Euro area by about 1.5% while China grew by 6.5%. Furthermore, the US monetary policy will remain highly accommodative in the next two years, even as the US Federal Reserve gradually raises interest rates. Given positive global economic conditions, the insurance premium volumes globally, which amounting to US$4.6 trillion, will continue to expand over the next couple of years, bolstered by strong growth in emerging markets, including Middle East and North Africa markets. Basically, the global primary non-life premium will continue to grow at 2.2% in 2017 compared to 2.4% in 2016. Emerging markets in Asia, Latin America and Central and Eastern Europe will contribute with growth rates of approximately 6-7% in 2017 compared to 5.3% in 2016. On the other hand, the real primary life insurer premiums, on global level, will outpace growth on the non-life side, with savings products in emerging Asia leading the way. Global life premiums are forecast to grow by 5.4%,4.8%, and 4.2% in 2016, 2017 and 2018, respectively.

The Mena insurance premiums have more than doubled between 2006-2015, with insurance premiums increasing to US$50 billion as of the end of 2015 compared to US$20.4 billion in 2006. This represents a compound annual growth rate of 11 percent over the period, although the growth in each market varies. Such growth in insurance industry is due to several key demographic factors like the economic growth, population expansion, as well as increasing the life expectancy which have impact on demand of insurance products in the region. In addition, Government investment in infrastructure projects have also provided new underwriting opportunities for further growth of the industry. For example, in the GCC countries, the healthcare spending has not shown any signs of pullback in spending as it has been one of primary sectors in the long-term vision of the GCC governments. One of the major force behind the industry's growth in recent years has been the implementation of compulsory health insurance schemes in various jurisdictions, especially the GCC countries, as well as the outstanding demand for Takaful products which create strong growth avenues for insurance companies in the region.

Overall, the positive growth outlook on the region and the low insurance penetration, which is considered to be the key opportunity for future growth, will continue to attract insurers, both domestic and foreign, to invest in the Mena insurance markets, but this is likely to increase the competition and put even further pressure on the profitability in the sector. However, the insurance companies in the region are generally strongly capitalized and possible future pressure on profitability is unlikely to reduce the credit strength of the sector in the medium term.

Given the positive trend for global insurance market, the insurance market in the MENA region will continue to see growth in premiums of around 5% for non-life lines and a growth that exceed 5% on the life side. Currently, the non-life insurance premiums represents almost 85% of the US$ 50 billion premiums of the insurance market in the Mena region and the life business continue to play a relatively minor role at 15% share of the market. Motor insurance is still the largest segment in the major markets such as the GCC, Morocco and Egypt. However, over the past few years, personal accident and health insurance have been the fastest growing segments. The main drivers behind this spectacular growth are legislation, in particular compulsory insurance requirements and population growth.

For life insurers in the MENA region, premium growth reached 4.2% in 2016. However, there are still signs of optimism for life insurers in the region. Increasing awareness should continue to further enhance the demand for life insurance products, while the ongoing rise in incomes will lead to more demand for wealth protection and accumulation products.

Despite the robust growth, the insurance industry in the region accounted for 1.1% of the world market, which was estimated at US$4.6 trillion in total revenue. Insurance penetration average in the Mena region is also well below 2 percent of the Gross Domestic Products (GDP), which represents less than a quarter of the global average level.

Furthermore, there are several challenges facing the insurance industry in the Mena region which include competition due to the increase in the number of insurance companies in each market which put pressure on the profitability of the sector. Also, the current global economic uncertainty has posed substantial challenges to insurance companies by creating volatility in investments values and returns. Public Awareness about insurance and its benefits is also another challenge as many fail to recognize insurance as an effective means of wealth protection, saving and security.

However, as the Insurance industry expands, the need to further enhance the regulations in the Mena region, in terms of core regulatory standards and market conduct requirements, is of paramount importance.

The regulators all over the Mena region need to work closely to further strengthen their regulatory framework in order to create greater harmony amongst the different jurisdictions so that the industry could capitalize on the growth opportunities. The financial crisis has been a reminder that markets need effective regulation if they are to operate properly.

As a regulator, the CBB always believes in continual enhancement and improvement of its regulatory framework for the growth and betterment of industry. The CBB has always played an important role in launching new initiatives to develop the insurance industry both locally and regionally. The issuance of the Takaful model is one of these initiatives in reaffirming Bahrain as the jurisdiction of choice for all the Takaful/ Retakaful companies globally. As you may aware, the main objective of the new Takaful rules, which is implemented starting January 2015, is to facilitate a faster growth of Takaful business in Bahrain while protecting the interest of all stakeholders, vis-à-vis participants, shareholders, and Takaful operator. It is also expected that the implementation of the Takaful rules will attract new entrants to the market and will foster competition for the betterment of the consumers.

Furthermore, it is necessary that the insurance licensees continue to improve the level of expertise and professionalism of their workforce. The CBB is keen to see that all insurance licensees do their utmost to provide adequate training and development opportunities for their staff.

As you aware, the CBB in cooperation with the Bahrain Insurance Association have already finalized the Standard Policy Document of Compulsory Insurance for Motors (Third Party Insurance) and the procedures for dealing with claims. Such documents have been issued and published as a Resolution in the Official Gazette, in order to ensure that high quality insurance services and fair treatments are offered to the policyholders. All the credits on this matter should go to the Bahrain Insurance Association and the insurance companies for their outstanding cooperation and understanding.

Generally, Regulatory authorities should support public awareness in order to enhance the public knowledge on the basics of insurance and the importance of such financial services to the general public. As far as consumer education is concerned, the CBB in collaboration with the Bahrain Insurance Association (BIA) have been holding “Insurance Day” on a yearly basis, the purpose of which is to educate the public on the importance of insurance products and services. The “Insurance Day” has so far been successful in enhancing insurance awareness amongst people. This is expected to further increase the penetration rate of insurance in Bahrain.

Looking ahead, we expect further growth in the insurance industry in the Mena region driven by moderate economic growth, despite slower than expected oil price recovery. Sector growth will continue to be supported by large investment in infrastructure and construction projects in the Mena region, further enhancement of regulatory and supervisory standards, as well as the support of the governments in making an increasing number of insurance products compulsory. Also, innovation and financial technologies is another big factor that insurers should keep an eye on in the coming years to upgrade their business and to grow the sector. All of these are expected to further enhance the insurance activities and growth of premiums in the Mena region.

Ladies and Gentlemen, this brings me to the end of my remarks. All that remains is for me to wish you an interesting and productive forum, and to thank you all for your kind attention.

Thank you.

13th Middle East Insurance Forum

The Gulf Hotel

(Manama, Bahrain)

20 – 21st February 2017

Opening Remarks

(20th February 2017)

By

Abdul Rahman Al-Baker

Executive Director of Financial Institutions Supervision

Central Bank of Bahrain

Your Excellencies, Ladies and Gentlemen – Good Morning.

It gives me a great pleasure to welcome you all to the 13th Middle East Insurance Forum. In its 13th year now, this forum has come a long way in supporting and strengthening the insurance industry. It has now firmly established its reputation as the region’s most influential annual gathering of the insurance industry leaders, supporting growth, excellence and innovation in the local and regional insurance industry. The Central Bank of Bahrain is proud to be associated with this event and will continue to support it in the future. I would like to thank the organizers, sponsors and speakers for supporting this important gathering.

The theme of this year forum is " The Current Challenges and their Implications on the Regional Insurance Industry”. This theme is important and timely as the insurance industry in the Mena region is undergoing transformation and there is a tremendous potential for the regional insurance market to grow and thrive.

As you are aware, the Middle East economies have expanded at a healthy rate over the last decade and have made a significant progress in a number of sectors such as petrochemicals, infrastructures and telecommunications. The insurance industry in the region has also experienced steady growth on the back of this economic development, improved regulatory environment, and increased public awareness.

Generally, the global economic situation is mostly favorable for insurance growth. The US real GDP is growing slightly faster than 2%, the Euro area by about 1.5% while China grew by 6.5%. Furthermore, the US monetary policy will remain highly accommodative in the next two years, even as the US Federal Reserve gradually raises interest rates. Given positive global economic conditions, the insurance premium volumes globally, which amounting to US$4.6 trillion, will continue to expand over the next couple of years, bolstered by strong growth in emerging markets, including Middle East and North Africa markets. Basically, the global primary non-life premium will continue to grow at 2.2% in 2017 compared to 2.4% in 2016. Emerging markets in Asia, Latin America and Central and Eastern Europe will contribute with growth rates of approximately 6-7% in 2017 compared to 5.3% in 2016. On the other hand, the real primary life insurer premiums, on global level, will outpace growth on the non-life side, with savings products in emerging Asia leading the way. Global life premiums are forecast to grow by 5.4%,4.8%, and 4.2% in 2016, 2017 and 2018, respectively.

The Mena insurance premiums have more than doubled between 2006-2015, with insurance premiums increasing to US$50 billion as of the end of 2015 compared to US$20.4 billion in 2006. This represents a compound annual growth rate of 11 percent over the period, although the growth in each market varies. Such growth in insurance industry is due to several key demographic factors like the economic growth, population expansion, as well as increasing the life expectancy which have impact on demand of insurance products in the region. In addition, Government investment in infrastructure projects have also provided new underwriting opportunities for further growth of the industry. For example, in the GCC countries, the healthcare spending has not shown any signs of pullback in spending as it has been one of primary sectors in the long-term vision of the GCC governments. One of the major force behind the industry's growth in recent years has been the implementation of compulsory health insurance schemes in various jurisdictions, especially the GCC countries, as well as the outstanding demand for Takaful products which create strong growth avenues for insurance companies in the region.

Overall, the positive growth outlook on the region and the low insurance penetration, which is considered to be the key opportunity for future growth, will continue to attract insurers, both domestic and foreign, to invest in the Mena insurance markets, but this is likely to increase the competition and put even further pressure on the profitability in the sector. However, the insurance companies in the region are generally strongly capitalized and possible future pressure on profitability is unlikely to reduce the credit strength of the sector in the medium term.

Given the positive trend for global insurance market, the insurance market in the MENA region will continue to see growth in premiums of around 5% for non-life lines and a growth that exceed 5% on the life side. Currently, the non-life insurance premiums represents almost 85% of the US$ 50 billion premiums of the insurance market in the Mena region and the life business continue to play a relatively minor role at 15% share of the market. Motor insurance is still the largest segment in the major markets such as the GCC, Morocco and Egypt. However, over the past few years, personal accident and health insurance have been the fastest growing segments. The main drivers behind this spectacular growth are legislation, in particular compulsory insurance requirements and population growth.

For life insurers in the MENA region, premium growth reached 4.2% in 2016. However, there are still signs of optimism for life insurers in the region. Increasing awareness should continue to further enhance the demand for life insurance products, while the ongoing rise in incomes will lead to more demand for wealth protection and accumulation products.

Despite the robust growth, the insurance industry in the region accounted for 1.1% of the world market, which was estimated at US$4.6 trillion in total revenue. Insurance penetration average in the Mena region is also well below 2 percent of the Gross Domestic Products (GDP), which represents less than a quarter of the global average level.

Furthermore, there are several challenges facing the insurance industry in the Mena region which include competition due to the increase in the number of insurance companies in each market which put pressure on the profitability of the sector. Also, the current global economic uncertainty has posed substantial challenges to insurance companies by creating volatility in investments values and returns. Public Awareness about insurance and its benefits is also another challenge as many fail to recognize insurance as an effective means of wealth protection, saving and security.

However, as the Insurance industry expands, the need to further enhance the regulations in the Mena region, in terms of core regulatory standards and market conduct requirements, is of paramount importance.

The regulators all over the Mena region need to work closely to further strengthen their regulatory framework in order to create greater harmony amongst the different jurisdictions so that the industry could capitalize on the growth opportunities. The financial crisis has been a reminder that markets need effective regulation if they are to operate properly.

As a regulator, the CBB always believes in continual enhancement and improvement of its regulatory framework for the growth and betterment of industry. The CBB has always played an important role in launching new initiatives to develop the insurance industry both locally and regionally. The issuance of the Takaful model is one of these initiatives in reaffirming Bahrain as the jurisdiction of choice for all the Takaful/ Retakaful companies globally. As you may aware, the main objective of the new Takaful rules, which is implemented starting January 2015, is to facilitate a faster growth of Takaful business in Bahrain while protecting the interest of all stakeholders, vis-à-vis participants, shareholders, and Takaful operator. It is also expected that the implementation of the Takaful rules will attract new entrants to the market and will foster competition for the betterment of the consumers.

Furthermore, it is necessary that the insurance licensees continue to improve the level of expertise and professionalism of their workforce. The CBB is keen to see that all insurance licensees do their utmost to provide adequate training and development opportunities for their staff.

As you aware, the CBB in cooperation with the Bahrain Insurance Association have already finalized the Standard Policy Document of Compulsory Insurance for Motors (Third Party Insurance) and the procedures for dealing with claims. Such documents have been issued and published as a Resolution in the Official Gazette, in order to ensure that high quality insurance services and fair treatments are offered to the policyholders. All the credits on this matter should go to the Bahrain Insurance Association and the insurance companies for their outstanding cooperation and understanding.

Generally, Regulatory authorities should support public awareness in order to enhance the public knowledge on the basics of insurance and the importance of such financial services to the general public. As far as consumer education is concerned, the CBB in collaboration with the Bahrain Insurance Association (BIA) have been holding “Insurance Day” on a yearly basis, the purpose of which is to educate the public on the importance of insurance products and services. The “Insurance Day” has so far been successful in enhancing insurance awareness amongst people. This is expected to further increase the penetration rate of insurance in Bahrain.

Looking ahead, we expect further growth in the insurance industry in the Mena region driven by moderate economic growth, despite slower than expected oil price recovery. Sector growth will continue to be supported by large investment in infrastructure and construction projects in the Mena region, further enhancement of regulatory and supervisory standards, as well as the support of the governments in making an increasing number of insurance products compulsory. Also, innovation and financial technologies is another big factor that insurers should keep an eye on in the coming years to upgrade their business and to grow the sector. All of these are expected to further enhance the insurance activities and growth of premiums in the Mena region.

Ladies and Gentlemen, this brings me to the end of my remarks. All that remains is for me to wish you an interesting and productive forum, and to thank you all for your kind attention.